LevFin High-Yield Insight: Trading volume declines to 2018 low with reduced new issuance, but increases for both are in store this week
Trade reporting in recent weeks showed a steady decline of activity in terms of dollar volume alongside a reduced quantity of new issues. It troughed yesterday without any new-issue prints and one of the slowest sessions this year in term of dollar volume, matching only that of stunted activities on holiday-related half sessions, but look for volume to pick up on both fronts as the week progresses into potentially the largest week in primary issuance in a month and a half, per LevFin Insights' tally.
The approximately $6.7 billion that changed hands Monday, June 18, surpassed Friday’s sleeper session of $5.1 billion but trailed deeply the $8.7 billion-per-day average trading volume for all of 2018, according to MarketAxess estimates.
New issue volume was $2.6 billion last week and average trading volume inclusive of all non-investment-grade bonds was $7.2 billion per day. The week prior had $2.9 billion and $7.5 billion, respectively.
Similar activity occurred last year, with the first two weeks of June putting out new issue volume of $7.9 billion and $2 billion, and secondary market trading volume going from an average of $8.2 billion per day to an average of $6.9 billion per day, respectively, per MarketAxess.
And the pattern holds again two years ago with the weekly new-issue metrics of about $12 billion and $5 billion and average-per-day trading volume of approximately $10.1 billion and $8.5 billion, respectively.
It isn’t rocket science, and it’s a long way of saying that trade volume will no doubt be picking up this week with a large cross-border calendar in place for near-term business. The approximately $5.9 billion equivalent in multiple currencies will certainly turn out much less supply in terms of U.S. dollar-denominated volume, what with a good chunk already known to be €750 million from Energizer Gamma and the majority of the $1.82 billion-equivalent Cirsa Gaming LBO transaction planned to be euros, including fixed- and floating-rate secured tranches next to one dollar-denominated series with a fixed-rate coupon.
Nonetheless, the big calendar is notable as the largest cross-border volume in eight months, or since an $8.5 billion-equivalent from Wind Tre as part of a multipronged recapitalization in late October 2017, and it’s the largest roster of deals measured in terms of the number of credits—four are on international roadshows—within an eight-transaction pipeline. For more details see: "High-Yield Calendar: Two new issues for next week's business join large cross-border pipeline for this week amid negative bias; details follow," LevFin Insights, June 19, 2018. – Matt Fuller
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